USA Compression Partners, LP — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are to FY2021 unless otherwise noted. This is an annual filing, not a standalone fourth-quarter report. The Partnership provides natural gas compression and treating services in U.S. energy markets, generally under fixed-fee contracts. Its fleet totaled 3.72 million horsepower at year-end.
Financial and operating highlights
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Total revenue | $704.6 million | $632.6 million | Up 11.4% |
| Operating income | $169.3 million | $140.9 million | Up 20.2% |
| Net income | $30.3 million | $10.3 million | Up 195.0% |
| Net loss attributable to common unitholders | $(18.4) million | $(38.5) million | Loss narrowed |
| Net cash from operating activities | $260.6 million | $265.4 million | Down $4.8 million |
| Adjusted EBITDA (non-GAAP) | $426.0 million | $398.4 million | Up 6.9% |
| Distributable cash flow (non-GAAP) | $221.5 million | $209.1 million | Up 5.9% |
| DCF coverage ratio (non-GAAP) | 1.08x | 1.03x | Improved |
Revenue gains reflected higher utilization, selective contract price increases, and growth in gas treating services. Year-end horsepower utilization rose to 91.8% from 82.7%; average revenue per revenue-generating horsepower per month increased 4.5% to $17.35.
Operating costs excluding depreciation rose 20.6%, faster than revenue, mainly due to higher parts, fluids, labor, outside maintenance, and vehicle costs. Adjusted gross margin percentage fell to 66.7% from 69.3%, and Adjusted EBITDA percentage fell to 60.5% from 63.0%, as inflationary cost increases preceded customer price adjustments. Interest expense increased 6.3% to $138.1 million amid higher rates and greater revolver borrowings.
Debt, liquidity, and distributions
- Year-end long-term debt, net of deferred financing costs, was $2.107 billion, versus $1.973 billion in 2021. This comprised $646.0 million under the revolving facility and $1.475 billion principal of senior notes due 2026 and 2027, both bearing 6.875% interest.
- Year-end revolver availability was $954.0 million; borrowing capacity subject to financial covenant compliance was $333.1 million. The Partnership reported a 4.76x leverage ratio under its Credit Agreement and compliance with its covenants at year-end.
- All revolver borrowings bear variable rates. The year-end weighted-average rate was 6.84%; management estimated a 1 percentage-point rate increase would add about $6.5 million to annual interest expense.
- Cash at year-end was $35,000. Operating cash flow was $260.6 million; net cash used in investing activities was $129.9 million, including $134.2 million of net capital expenditures.
- Common-unit distributions remained $0.525 per quarter, or $2.10 annually. The Partnership paid $207.4 million in cash common-unit distributions and $48.8 million to preferred unitholders in 2022. Preferred distributions are cumulative and senior; common-unit distributions are subject to available cash, covenant conditions, and payment of preferred distributions.
Changes, outlook, and material items
- Expansion capital expenditures increased to $145.1 million from $40.2 million in 2021. Management budgeted $260–$270 million of expansion capex and approximately $26 million of maintenance capex for 2023. At year-end, binding equipment and serialized-parts purchase commitments were $159.3 million, expected to be settled within 12 months.
- Management said cash from operations and, if needed, revolver borrowings should be sufficient through 2023 for debt service, working capital, planned capex, and distributions. This is management’s assessment, not formal earnings guidance. It cited favorable longer-term demand fundamentals, while noting that outcomes depend on commodity markets, producer activity, region, customers, and contract terms.
- There were no goodwill impairments in 2022; a $619.4 million goodwill impairment was recorded in 2020. Compression-equipment impairments declined to $1.5 million from $5.1 million in 2021.
- A $44.9 million Texas sales-tax liability and matching Energy Transfer receivable were eliminated after Energy Transfer paid the settlement in 2022 under an indemnification agreement. A separate Oklahoma Tax Commission assessment remains disputed; reasonably possible losses are estimated at $0–$21.8 million, including penalties and interest.
- Preferred units carry a 9.75% annual distribution rate and may convert into common units; all may be convertible from April 2, 2023, potentially into up to approximately 25.0 million common units. The General Partner also may redeem preferred units on or after that date under the partnership agreement.
- Management identified inflation, supply constraints, rising interest rates, customer and industry concentration, competition, month-to-month contracts, environmental and climate regulation, and access to capital as significant risks. The ten largest customers generated about 38% of FY2022 revenue; month-to-month services represented about 29% of compression-services revenue. One customer represented 13% of year-end trade receivables.
Investor verification priorities
- Review 2023 utilization, pricing, and cost trends to assess whether inflationary margin pressure has eased.
- Check actual expansion and maintenance spending against the 2023 plans, and how the $159.3 million purchase commitments are funded.
- Monitor leverage, covenant headroom, variable-rate interest costs, and the revolver’s springing maturity: it may mature December 31, 2025, if any 2026 notes remain outstanding then.
- Assess the sustainability of common distributions after preferred-unit payments, capital needs, debt service, and any preferred-unit conversion or redemption.
- Track the Oklahoma tax dispute, major-customer receivable exposure, contract renewals, and the potential effect of supplier delays and environmental rules.